In a further complaint against Stefan Lumiere, it was alleged that he and Plaford engaged in a fraudulent scheme to falsely inflate the value of securities held by a hedge fund advised by their firm. Plaford has pleaded guilty and charges against Lumiere were unsealed on Wednesday. Lumiere surrendered to authorities Wednesday. Visium is not accused of wrongdoing.
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“I’m deeply saddened by today’s events”, Visium founder Jacob Gottlieb said through a spokesman.
June 16 The following are the top stories on the New York Times business pages. He managed pharmaceutical investments and as much as $2 billion, including borrowed money.
Both were arrested on Wednesday and expected to appear that day in the federal court in Manhattan.
Mr. Berke also called Mr. Valvani “an innocent man whose investment decisions were always based on rigorous and entirely appropriate research and analysis”. Berke also accused Bharara of “stretching the facts and law to try to transform entirely innocent trading decisions into a crime”. Johnston also had a lesser known role as a hedge fund consultant. More than a dozen consultants and company insiders were convicted.
“We allege that Valvani’s formula for trading success was tapping Johnston to abuse his position of trust as a generic industry representative to the FDA and underhandedly obtain confidential information from his friends and former colleagues at the FDA”, said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.
The case exposes the pipeline of information between Wall Street and Washington and the potentially market-moving tips that flow from the FDA’s drug approval process.
Johnston is alleged to have obtained and passed to Visium confidential information about anticipated FDA approvals on enoxaparin, a generic drug that helps prevent the formation of blood clots.
The Securities and Exchange Commission has nabbed another set of traders who allegedly profited off biopharma secrets.
Johnston worked for 12 years at the FDA, where he was deputy director of the Office of Generic Drugs. It had been first to file for FDA approval, if second to market.
Johnston would chat with his friend and others about the drug applications, mixing “banter with professional discussions and gossip about mutual friends and colleagues to hide his efforts to obtain non-public information”, according to the SEC.
The SEC and Justice Department are pursuing a separate probe into an April 2013 leak of information from the Medicare and Medicaid agency to investors concerning a coming announcement that would benefit health insurance firms. Valvani used this information to buy $35 million in Momenta shares and $43 million in credit-default swaps that hedged against a potential drop in Sanofi shares. He allegedly used the tips to trade on Momenta Pharmaceuticals Inc. and Sanofi SA in 2010, authorities said, making about $25 million in profits.
Valvani is the latest Indian-origin hedge fund manager to be charged with insider trading.
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“FDA, by policy, does not comment on potential or ongoing investigations”, Christopher Kelly, a spokesman for the FDA, said in an e-mail.
